Oct 14, 2021 - World

Taliban press Biden to release frozen Afghan assets as economy shrivels

Afghans wait outside a bank in hopes of withdrawing cash, watched by a Taliban fighter. Photo: Wakil Kohsar/AFP via Getty

With the Afghan government and economy starved of cash, the Taliban are pressing their claim to the roughly $8 billion in Afghan foreign reserves that have been frozen by the U.S.

Why it matters: Afghanistan is barreling into a humanitarian crisis, and donor countries and international institutions have cut off the aid that accounted for some 75% of the previous government’s budget.

  • The U.S., EU and others are providing humanitarian assistance through third parties on the ground, but experts fear the economy is shriveling up due in part to a dire cash shortage.
  • “Right now, with assets frozen and with development aid paused, the economy is breaking down,” UN Secretary-General António Guterres said this week. Between $7 billion and $8 billion of the roughly $9 billion in frozen Afghan assets are held in the U.S.
  • Those reserves are the “No. 1 issue” on the Taliban’s agenda in talks with foreign interlocutors, according to a source familiar with those discussions.
  • Taliban representatives asked the U.S. to unfreeze the funds last weekend in the first meeting between the sides since the U.S. completed its withdrawal on Aug. 31.

The other side: The Biden administration appears set to leave the Afghan assets in limbo for some time.

  • State Department spokesperson Ned Price said Tuesday that the reserves are among the “carrots and sticks” the U.S. has to influence the Taliban, and decisions on such issues will be based on the Taliban’s “conduct.”
  • A senior administration official told Axios that the funds couldn’t be released “with the snap of a finger” due to the fact that the U.S. has not recognized the Taliban government, the existing terrorism sanctions against the group and its leaders, and the legal cases in which "several groups of plaintiffs are seeking to attach the funds."
    • The official wouldn't specify which litigation, but the families of 9/11 victims have brought lawsuits against Afghanistan for harboring al-Qaeda.
  • “Releasing the reserves is no guarantee Taliban will actually use it effectively to solve problems,” the official added. “The Taliban was in control in the '90s and was not a responsible economic steward and they have shown zero evidence they will be responsible stewards now.”

“The administration is in a real pickle here,” says Laurel Miller, a former top State Department official on Afghanistan and now director of the Asia program at the International Crisis Group.

  • “On the one hand, there is certainly an argument, technically speaking, for not releasing the assets to a government that is not recognized,” Miller says.
  • “There is also a political argument that may be the largest obstacle, that no matter what the facts are about who these assets belong to, it could be construed as giving billions of dollars to the Taliban.”
  • “On the other hand, the fact that these assets are frozen is one of the factors that is doing damage to the Afghan economy, because there is a liquidity crisis. There is a lack of cash in the Afghan banking system,” Miller notes.

State of play: The UN is urgently seeking additional funding and warning that the crisis will deepen as winter approaches. Already, only 5% of Afghan households have enough to eat.

Between the lines: The senior U.S. official argued that the reserves are a “separate issue” from the U.S. response to the humanitarian crisis and that releasing them would “not solve the lasting economic challenges Afghanistan is facing.”

  • But as Afghanistan’s cash crunch deepens, the pressure to release them will grow.
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